Anti-Foreign Bias

The last 20 years have brought the world more trade, more globalization and more economic growth than in any previous such period in history. … Despite all these gains, the prevailing intellectual tendency these days is to apologize for free trade. A common claim is that trade liberalization should proceed only if it is accompanied by new policies to retrain displaced workers or otherwise ameliorate the consequences of economic volatility. …

What’s really happening is that many people, whether in the United States or abroad, are unduly suspicious about economic relations with foreigners. These complaints stem from basic human nature – namely, our tendency to divide people into "in groups" and "out groups" and to elevate one and to demonize the other. Americans fear that foreigners will rise at their expense or "control" some aspects of the economy.

Virtually all of the "second best worrying" about trade could be applied also — in fact more so — to technical progress. Or to trade across the fifty states. Yet when it comes to foreigners, the worries acquire a more dangerous credibility. That is the real second best problem, not any theorem you might derive about trade and externalities.

It seems like the difference between US states and foreign countries is that you can vote with your feet between states, but not nearly so easily (or at all, in many cases) between countries.

And, others can vote with their feet between states, too. So there is a strong force keeping the US states on roughly the same economic level, even if voting with your own feet is too hard to do.

spindizzy

The newspaper link seems to be another example of how a complex debate can be short-circuited with accusations of redneck racism.

I am not an economist and won’t pretend to be informed on this issue, but I do have an opinion and I may as well express it.

In general, economists are vocal about comparative advantage but either ignore or underplay implications for national security and social cohesion.

It’s a problem for all applied mathematics: not all factors which are difficult to model are negligible.

Sam B

In general, economists are vocal about comparative advantage but either ignore or underplay implications for national security and social cohesion.

That’s because you can justify almost anything in the name of “national security” and “social cohesion”. Examples: detaining all members of a certain race on “fifth column” grounds; intercepting, storing and monitoring everyone’s personal data; seizure of private property by the government; nailing the entire population’s feet to the floor (it’s not a straw man, if no-one can move then no-one can commit terrorist acts).

If something can be used to justify anything, it’s worthless as a justification. It’s a semantic stopsign, just like the word “God” when explaining the creation of the universe. “What caused the big bang?” “God! (Stop asking questions.)” “Why should I buy steel from Mr Blake, when I can get it cheaper from Mr Chang?” “Social cohesion! (Stop asking questions.)”

The fact that economists focus on things that are measurable and definable, such as output, disposable income and life expectancy, and not on unmeasurable terms beloved of politicians like “social cohesion”, is a strength and not a weakness. And if you think that this is some sort of cold-hearted defect inherent to economists, try this experiment. Ask 100 ordinary men on the street whether they’d prefer a 10% wage increase, or 10% more “social cohesion”. The fact that none of them will be able to visualise what a 10% increase in “social cohesion” would even look like is not their fault, or economists’ fault, it’s the fault of the thought-terminating cliché.

I think I’m pretty rare because I actually really like globalization. I love the idea of spreading wealth more evenly across the world, and I am an American who doesn’t mind seeing America’s wealth reduced in favor of a poorer region. I bite the bullet of globalization: if someone can do my job just as well for less money, then give it to him and I’ll find something I’m good at to do instead.

Nick Tarleton

That’s because you can justify almost anything in the name of “national security” and “social cohesion”. Examples: detaining all members of a certain race on “fifth column” grounds; intercepting, storing and monitoring everyone’s personal data; seizure of private property by the government; nailing the entire population’s feet to the floor (it’s not a straw man, if no-one can move then no-one can commit terrorist acts).

Fully General Counterargument. You can make up a justification for anything in terms of anything if you’re clever enough. This doesn’t mean no policies are genuinely justified by national security or social cohesion – or that all are – regardless of what people spin to justify their preferences. Obviously, some policies really do hurt national security, and some help it. Your argument is grounds for ignoring vague references like spindizzy’s, but not for ignoring actual arguments that you can evaluate the validity of (unless most of even those arguments are BS and you’re not very good at identifying them).

Nick Tarleton

Also, obviously, that not everything that increases national security should be done doesn’t mean it shouldn’t be taken into account at all. There are $BIGNUM other reasons nailing everyone’s feet to the floor is a bad idea.

Ellis G

Demonization of The Other isn’t uniquely human (animals do it), necessarily problematic (it has some utility), sociologically avoidable (it happens in all contexts, throughout history, and always will), primarily psychological (it’s accountable without reference to anything mental or even individual), or linear. 🙂

Spin it is hard to engage your concern that globalization reduces security and cohesion without seeing some more concrete reasons to think this might happen.

spindizzy

Security issues related to free trade in general:

(1) The need to feed the domestic population in war or natural disaster.
(2) The potential for political blackmail resulting from economic dependency.
(3) Environmental degradation as a result of industrial specialisation.

Security risks relating to worker immigration (emigration):

(4) The risks of internal conflict between distinct subpopulations.
(5) The vulnerability of any political system, especially democracy, to intentional or unintentional perversion from within.
(6) The lack of identification of the individual with the state, unwillingness to make personal sacrifice.

Social cohesion issues relating to free trade in general:

(7) The desirability of social stability and of gradual cultural change relative to rapid change.
(8) The destruction of cultural heritage.
(9) In a game-theoretical sense, the overemphasis on exploitation rather than exploration and the associated risk of bubble economies.

Social cohesion issues relating to immigration (emigration):

(10) The desirability of broad consensus within a geographic locale, since greater diversity necessarily means less representation.
(11) The incompatibility of a welfare state with open borders economic policy.
(12) The common preference for one’s own culture as an economic good.
(13) The common preference for one’s own ethnicity as an economic good.

I don’t claim this list is comprehensive. Also, as I said I am not an economist so I may not have framed these arguments very well. Wikipedia has a more detailed summary of some points under “free trade debate”.

Different points will count more or less heavily with different people. I do not endorse every point made above.

I have not presented the many arguments in favour of free trade and worker migration, not because I don’t think they are valuable, but because that seems to be where most biases here already lie.

Spin you are listing logically possible negative effects of globalization, not reasons to think it is on net harmful, nor as per Tyler’s comment reasons to think it is more harmful than internal change or tech progress.

spindizzy

Sorry, Robin. I may have given the wrong impression. I do not believe globalisation is on net harmful. I just resented the accusation (from the NYT) that it is impossible to oppose globalisation without being a racial bigot.

Spin, Tyler did not make the claim you attribute to him, nor did he say there are no negative effects of globalization. He said our innate tendency to demonize outsiders made us unduly suspicious of trade with foreigners.

All right, let’s blame Tyler for what he says: “What’s really happening is that many people, whether in the United States or abroad, are unduly suspicious about economic relations with foreigners.”

Tell that to, e.g., Canadian landlords who are letting apartments to Russian nationals and finding the cheque (for more than the rent) bouncing only =after= they refund the difference.

If Tyler wants to pretend here that there isn’t a difference between institutional and financial practices, then he should stop agitating for “free trade” agreements on the grounds that they facilitate opening of those financial institutions to a more US-like (or “market”-like, even if we stipulate that the two are not necessarily identical) practice.

“By 2010, China will have more Ph.D. scientists and engineers than the United States.” By 2010, China will also have many more people living below the poverty line than the United States. In fact, it will have a multiple of the U.S. population (one hopes a low multiple, more on the order of 1.1 than 1.7-2.0) living below the poverty line. Playing with absolute numbers is meaningless, and he knows it. So why does he bother to do it, except to cherry-pick?

Ansel F

Ken Sharpe, I agree.

Ken Houghton: Replace “Russian Nationals” with any other epithet of your choice that is still true of those tenants, and you can see the bias. Are they poor? Are they atheists? If they pulled this trick in Russia, the Russian landlord would be pissed too, and would probably be able to pin the blame on some distasteful part of their identity. Unless you’ve got a statistical study showing it’s significant to be from russia, it could just as likely be any one of a number of other factors contributing to their propensity for fraud..

Lord

The effects of technology and trade are very different though. Technology promotes higher skilled work while trade lowers wages through arbitrage and lowers the demand for technology.

Leonid

“The fact that economists focus on things that are measurable and definable, such as output, disposable income and life expectancy, and not on unmeasurable terms beloved of politicians like “social cohesion”, is a strength and not a weakness.”

The fact that some quantities like “social cohesion” can not be measured easily does not imply they can not be measured at all and hence irrelevant. For instance, consider “patriotism” (a possible by-product of “social cohesion”). Historical records of conflicts between greek city states showed that in absence of clear numerical advantage of either side about ¾ of battles were won by troops defending their home town. Since the defeat would often be followed by slaughter and pillage, which tend to be detrimental for the economy, investing into “patriotism” might have been a very sound economic policy.

I think that instead of dismissing terms like “social cohesion” economists should find ways of quantifying them (preferably without making equal groups of people kill each other). The alternative is to leave the subject exclusively to politicians.

I discussed what actually causes military units to be effective here. Hint: it isn’t patriotism.

I’m in favor of both unilateral free-trade with an end to all subsidies and immigration restriction, or possibly a Gulf State style guest-worker system. That (along with my foreign policy beliefs) gives me reason to believe I suffer less than others from anti-foreign bias, including people whose support on immigration restriction I am glad to have.

Joel Bergsman, USA

I agree with Tyler on what might be called the “truth vs facts” on trade, and also on the “us vs them” about fear of foreigners. But I disagree on the importance of the latter for resistance to free(r) trade. Resistance to freer trade (as well as to innovation) comes from people who fear (or have already found) that they cannot compete, or less strongly that trade will reduce their profits. These people look for fora and institutions where they and like-minded people can band together to increase their power to restrict trade. In the early USA, states had the power to do this, so they looked to states and did it against fellow Americans; this was one of the reasons why the Constitution was adopted and took this power away from the states; now there are no institutions below the federal level and that’s the main reason why trade restrictions are now levied against foreigners. When China started moving to a market economy, in the 1970s and 80s, provinces could and did restrict trade with other provinces (i.e. other Han Chinese); gradually the central government reduced their power to do so and today in China trade measures are against foreigners. Xenophobia may play a part but the main determinant is the level at which the institutions with trade-restricting powers exist.

Leonid

“I discussed what actually causes military units to be effective here. Hint: it isn’t patriotism.”

I didn’t claim that patriotism is the only important factor. However, the claim that it is not important at all seems implausible. Could you elaborate on this? The link you provide contains no arguments against the importance of patriotism for military effectivness.

Sam B

The fact that some quantities like “social cohesion” can not be measured easily does not imply they can not be measured at all and hence irrelevant. For instance, consider “patriotism” (a possible by-product of “social cohesion”). Historical records of conflicts between greek city states showed that in absence of clear numerical advantage of either side about ¾ of battles were won by troops defending their home town. Since the defeat would often be followed by slaughter and pillage, which tend to be detrimental for the economy, investing into “patriotism” might have been a very sound economic policy.

“Proportion of Athenians in the Athenian army” is quite clearly a measurable value. The relationship between that quantity and the equally measurable quantity of battles lost can be statistically analysed. If I’m the commander-in-chief of Athens, I can take meaningful steps to recruit more Athenians; and if the army then wins more battles, then other things being equal, I’ve done the right thing.

“Patriotism”, though, is just another meaningless, unmeasurable term which I can do nothing to meaningfully affect. If the Athenian army is full of Spartans I can’t make them think that Athens is Sparta. So as commander-in-chief, I should leave debates about “patriotism” to the men in robes and concern myself with the output of the local recruiting offices.

(It’s irrelevant, anyway, we all know that the Battle of Thermopylae was won by Scots. Hollywood said so.)

I think that instead of dismissing terms like “social cohesion” economists should find ways of quantifying them (preferably without making equal groups of people kill each other).

It can’t be quantified. Certain numbers, such as crime rate, can be quantified, and people may think of those things, associate “crime” with “social cohesion”, and then assume that measurability magically crosses the bridge of association. But it doesn’t. Politicians don’t like focusing on the measurable aspects of social cohesion, because then they have to explain why crime should be decreased through trade controls, rather than other, more obvious measures such as enforcing existing laws.

The alternative is to leave the subject exclusively to politicians.

Once we’ve gently taken away the measurable, actionable elements of “social cohesion” and given them to the care of people who know what they’re doing, they can knock themselves out as far as I’m concerned.

Sam B

Incidentally: I’m not saying that patriotism doesn’t exist. It exists and it feels quite nice inside your own head. But outside your own head, it’s unmeasurable, and it’s a waste of time trying to make policy that affects unmeasurable things. If a politician says “We must increase patriotism”, say “What do you mean by “patriotism” that we can measure and meaningfully affect?” If he says “When soldiers defending a city come from that city, they are more likely to win; that shows that patriotic soldiers fight better, so we need more patriotic soldiers”, everything after the semicolon adds no new meaningful information to the question of how to defend the city. Apply Occam’s razor and say “Right, how do we get more home-grown soldiers?”

Possibly the clarification is unnecessary on this blog, but so many people assume that just because economists don’t attempt to measure the unmeasurable, economists don’t think the unmeasurable exists.

Joel Bergsman, that sounds like traditional self-interested rational Public Choice. Bryan Caplan has shown it’s an inaccurate description of politics. Voters instead are like mad scientists.

Leonid, they looked at soldiers and tried to measure their “morale”, opinions about the war, their country and stuff like that. None of it showed any relation to combat effectiveness.

ad

think I’m pretty rare because I actually really like globalization. I love the idea of spreading wealth more evenly across the world, and I am an American who doesn’t mind seeing America’s wealth reduced in favor of a poorer region.

Globalization (what happened to calling it trade, by the way?) does not reduce America’s wealth in favor of a poorer region. It increaces Americas wealth (and that of the poorer region) by exploiting comparative advantage.

It is just that it unpredictably alters the distribution of wealth within America. But so does new technology, so why do people object to one, but not the other?

Leonid

“Incidentally: I’m not saying that patriotism doesn’t exist. It exists and it feels quite nice inside your own head. But outside your own head, it’s unmeasurable”

Sam, in the example from the greek history that I’ve mentioned increased patriotism manifested itself in 50% bonus to the victory chances. Hence patriotism or at least its manifestations are measurable. Therefore at least in theory it should be possible to test the efficiency of public policies aimed to boost “patriotism” or “social cohesion”, just as we test the efficiency of economic policies.

“Leonid, they looked at soldiers and tried to measure their “morale”, opinions about the war, their country and stuff like that. None of it showed any relation to combat effectiveness.“

Using polls seems to me a very inaccurate method of measuring “morale”. In polls most people claim to be “better than average drivers”, men claim to have about twice as many sexual partners as women. Likewise if you ask a soldier of whether he is willing to die for his country or work hard for its victory, his answer may be less correlated with his actual willingness to do so than with the size of his ego.

Ansel F – True, but I use the example of Russians because it has been done repeatedly enough to be reported as a problem. (As an American who has an application in for an apartment in Montreal, I now have a relative [“comparative”] advantage over an honest Russian applicant who would have the same bona fides–through no other reason than that enough “lemons” of Russian origin have been in the market recently to cast aspersions on any honest searchers.)

ad – “It is just that [globalization] unpredictably alters the distribution of wealth within America. But so does new technology, so why do people object to one, but not the other?”

“Unpredictably” just isn’t true (nor, quite frankly, would I blame globalization for most of that change. Ask Warren Buffett). As more value accrued to capital [new technology], there should be a temporary spike in the value assigned to capital. Then people learn to use it, and there (again) should be a rebalancing to labor. (The more skilled laborer should be compensated for hisser additional skills.) So the long-term change from improvements in technology should be close to zero on the balance between labor and capital, cet. par.

The trend has run that capital’s share of income has gone from ca. 25% to ca. 33% over the past fifty years, with inequality increasing with the share to capital. (Again, no surprise. The large majority of Americans do not own capital and therefore will not benefit directly from an increase in share to capital. [And, no, I don’t count stock held in an IRA/401{k} as capital for those who have no other major capital holdings–it’s an annuity meant to be consumed at a future date, and therefore should be viewed as savings, not investment.])

Offshoring, otoh, both reduces labor costs (increasing inequality, as noted above) and reduces the values of those skills in the workplace. Ask anyone who made Zenith televisions (e.g.) whether their years of experience (what we call “sweat equity” when it’s a white-collar job) were compensated for by their next employer at the gas-pumping station or Starbuck’s or laying network cables.

And the result is not that televisions went away: they’re just built elsewhere, by workers with less skill, and the institutional memory of how to make them in the U.S. fades away and goes away, even as the demand for product goes up.